Govt backs TPP to trump Aust-Japan trade deal

Trade Minister Tim Groser is not impressed by Australia's free trade agreement with Japan and hopes it will be ignored by the United States within the Trans Pacific Partnership.

He was aware there had been some very sharp criticism of the deal by the United States."I take note of that - I'm a trained diplomat so that's what I say in those situations," he told the Herald.

"I think what that means is the Americans are not going to take a blind bit of notice of this in terms of setting their level of ambition on agriculture in TPP.

"And frankly, from our point of view, we hope that is indeed the case."

The deal was announced last week when Australian Prime Minister Tony Abbott was in Japan.

While it is seen to be so poor as to undercut TPP ambitions, it is also seen to be enough to cause New Zealand beef exporters concern if the TPP can't better the Japan deal.

US President Barack Obama is due in Japan next week on a four-country visit to Asia and Mr Groser said intense TPP negotiations were going on between the US and Japan ahead of the visit.

The Australia deal is the most liberalising trade deal Japan has signed with another country, which is why Mr Groser has described it as positive, if modest.

But it is well below the ambitions set out by US President Barack Obama for the 12 countries negotiating the TPP, including both Japan and Australia.

The aim, set out in November 2011, was to reach a comprehensive agreement, meaning eliminating all tariffs on all goods eventually.

According to the Australian Government, its deal with Japan will reduce tariff on frozen beef to 19.5 per cent on full implementation although it takes 18 years to get there.

It cuts the tariff on fresh beef to 23.5 per cent over 15 years. Australia has also been given a duty-free quota of 20,000 tonnes at full implementation on cheese access to Japan. Bottled, sparkling and bulk wine will be duty free over seven years. Tariffs on Australian honey will be eliminated over10 years.

Australian pork will have preferential access and tariffs will be eliminated on a variety of seafood.

But Mr Groser said the beef in particular would become a problem if the TPP failed, leaving Australia's beef producers with preferential access on beef to the Japanese market over their New Zealand competitors.

He did not think there would be a problem with dairy in the event of a TPP failure because of the size of the deal in the Japan-Australia FTA.

Mr Groser said New Zealand had tried to get a free trade agreement with Japan between 2005 and 2008 when Labour's Phil Goff was Trade Minister.

Part of the reason it didn't succeed was because New Zealand had higher standard "but we also have less muscle than Australia."

New Zealand completely changed direction in terms of its trade diplomacy on the issue when it saw there was a serious possibility of getting Japan into TPP "for the very simple reason we thought the United States has got more leverage over Japan than we or Australia ever would - so we are still backing that horse."

All eyes were now on what came out of Mr Obama's discussions with Japan's Prime Minister Shinzo Abe next week.

"Hopefully this will provide some clarity about the level of ambition we can expect in a hopefully successful TPP."

The TPP has evolved into a series of bilateral trade negotiations with different countries offering different transitions to various countries within the 12 members.

But Mr Groser said the aim was to "ensure we get to the same end point."

The executive director of the New Zealand International Business Forum, Stephen Jacobi, said there were "mega issues" around TPP that had not been resolved.

The fundamental one was what the nature of the negotiation was.

"Is it actually a plurilateral negotiation amongst 12 partners or is it a series of bilateral negotiations amongst all 12?

"That contradiction in TPP hasn't been worked out."

It was meant to be a plurilateral negotiation and the Honolulu Declaration in 2011 made that clear - "it's just that they are not acting like that."

He said it was time for the United States to show leadership by example.

"It is the nature of trade negotiations to teeter on the brink of collapse but we could do with a bit more momentum and I think the United States has to lead it," Mr Jacobi said.

"It's not about badgering everyone; it's about walking the talk and Obama has got to be able to say when he meets Abe 'I'm prepared to open up my market and you need to open up yours.' Until he can say that, there is going to be obvious reluctance."

But until Mr Obama had fast -track authority from the Congress he probably could not say that and that was not likely to happen until after the mid-term elections in November.

"I think things are a bit stuck, but I don't think it is the end of TPP."

Mr Jacobi said the Australian Government could not be faulted for wanting to get some advantage for their exporters in the Japanese market.

"But this deal woefully undershoots what might have been possible, what might still be possible in TPP.

While Australia had succeeded in opening up "ever so slightly" the Japanese agricultural markets, the effect wasn't going to be such that it contributed to any fundamental rethink of those policies in Japan.

Mr Jacobi said the Japanese "couldn't care less about Australia."

They were only interested in the United States and TPP and they were using the FTA agreement try and set out in a public way what might be possible from their perspective, which doesn't seem to be very much.

"They are trying to drive a wedge between TPP members and the Americans."

The Australians have not done anyone a great service because on two big TPP issues, agriculture market access and the investor state dispute settlement, which was absent from the FTA, Australia had managed to convey a message that they, as one of the 12, were willing to settle for something less high quality, ambitious and comprehensive.

Mr Jacobi said there was a view that Prime Minister Abe had wanted to use the TPP as a means to stimulate the deregulation and liberalisation of agriculture in Japan.

"We understand why it's complicated, we understand it will take time and he doesn't have a completely free hand and even though he doesn't have any elections of the next three years he has internal pressures from the LDP.

"If that was the strategy, it is hard to see how this thing with Australia gets him in that direction."

Comments by TPP arch critic Professor Jane Kelsey, of Auckland University, says Australia has abandoned New Zealand, and her observations are similar to Mr Jacobi's.

"Not only has Australia got first dibs on what Japan is prepared to off, it appears to have settled for a much lower standard than the US has demanded," she said.

"If the US is unhappy, New Zealand should be distraught," she said.

Mr Groser had consistently said the TPP had to include a comprehensive liberalisation of all agricultural products.

"It is time for Mr Groser to face reality. New Zealand has nothing to bargain with and no political leverage."

The risks to regulatory sovereignty were too high and prospects for economic benefits were exceedingly low.